Federal judge: Online travel companies must pay Texas cities more than $55M

Jessica M. Karmasek Apr. 9, 2013, 7:20pm

SAN ANTONIO (Legal Newsline) -- A federal judge ruled last week that 11 online travel companies must pay 173 Texas cities more than $55 million in back taxes.

In 2009, a jury ruled in the cities' favor but awarded less than the $55,146,489 Judge Orlando Garcia of the U.S. District Court for the Western District of Texas reached in his final judgment Thursday.

For five years, the cities have argued that the companies -- including Hotels.com, Hotwire, Travelocity, Expedia and Orbitz -- were not paying their fair share of taxes.

In particular, the cities alleged the companies failed to collect and remit hotel occupancy taxes on the difference between the retail price of the hotel rooms charged to their customers and the wholesale price paid by the online travel companies to the hotel.

Garcia wrote in his nine-page judgment that the harm to the cities, as a result of the unpaid taxes, is "continuous and ongoing."

An association representing the online travel industry issued a statement Friday in response to the judgment:

"This was a decision rendered over three years ago, and since then other Texas courts who have considered this issue have found the OTCs not liable. This includes a Houston trial court and a Houston Court of Appeals. The Texas Supreme Court declined to review that case and let it stand," said The Travel Technology Association, or Travel Tech.

"Given the previous rulings in Texas in our favor, we feel confident that the (U.S. Court of Appeals for the) Fifth Circuit will reverse Judge Garcia's decision as it is inconsistent with Texas law as defined by the Texas appellate court. The Fifth Circuit is required to defer to the decisions of Texas state courts when it makes its decision."

Travel Tech's members include: Amadeus, Expedia, Orbitz Worldwide, Priceline, Travelocity, Travelport and Vegas.com.

From Legal Newsline: Reach Jessica Karmasek by email at jessica@legalnewsline.com.

More News